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Simple liquidation—Schedule of Cash Available
The partnership of Flo and Fay is in the process of liquidation. On
January 1, 2011, the ledger shows account balances as follows:
Cash $10,000 Accounts Payable $15,000
Accounts Receivable 25,000 Flo capital $40,000
Lumber inventory 40,000 Flay capital 20,000
On January 10, 2011, the lumber inventory is sold for $25,000, and
during January, accounts receivable of $21,000 is collected. No further
collections on the receivables are expected. Profits are shared 60
percent to Flo and 40 percent to Fay.
Required: Prepare a schedule showing how the cash available on February 1, 2011,should be distributed.
E 17-2
Liquidation—Journal entries
After closing entries were made on December 31, 2011, the ledger of Mac, Nan, and Obe contained the following balances:
Cash $39,000 Accounts Payable $5,000
Inventory $16,000 Mac capital (40%) $15,000
Nan capital (30%) 8,000
Obe capital (30%) 27,000
Due to unsuccessful operations, the partners decide to liquidate the
business. During January some of the inventory is sold at cost for
$10,000, and on January 31, 2012, all available cash is distributed. It
is not known if the remaining inventory items can be sold.
Required: Prepare all journal entries necessary to account for the transactions of the partnership during January 2012.
E 17-3
Liquidation—Cash distribution computation, safe payments schedule
Fed, Ela, and Luc have decided to liquidate their partnership. Account balances on January 1, 2011, are as follows:
Cash $120,000 Accounts Payable $40,000
Other assets 120,000 Fed capital (30%) 85,000
$240,000 Ela capital (30%) 25,000
Luc capital (40%) 90,000
$240,000
The Partners agree to keep a $10,000 contingency fund and to distribute available cash immediately.
Required: Determine the amount of cash that should be paid to each partner.
E 17-4
Liquidation—Cash distribution computation, safe payments schedule
Jan, Kim, and Lee announce plans to liquidate their partnership
immediately. The assets, equities, and profit-and-loss sharing ratios
are summarized as follows.
Loan to Kim 20,000 accounts payable 60,000
Other Assets 180,000 Jan Capital (50%) 59,000
200,000 Kim Capital (30%) 29,000
Lee capital(20%) 52,000
200,000
The other assets are sold for $120,000, and an overlooked bill for
landscaping services of $5,000 is discovered. Kim cannot pay her
partnership debt at the present time, but she expects to have the money
in a month or two.
Required: Determine how cash should be distributed to creditors and partners.